Heard in the Court of Appeals August 27, 2014
[Copyrighted Material Omitted]
Patrick, Harper & Dixon, LLP, by Michael J. Barnett and L. Oliver Noble, Jr., and Carlton Law PLLC, by Alfred P. Carlton, Jr., for Plaintiff.
Sharpless & Stavola, P.A., by Frederick K. Sharpless, for Defendant and Third-Party Plaintiff.
No brief for Third-Party Defendants.
STEPHENS, Judge. Judges CALABRIA and ELMORE concur.
Appeal by Plaintiff from order entered 26 September 2013 by Judge Richard L. Doughton
in Catawba County Superior Court, No. 12 CVS 3021
Factual and Procedural Background
Plaintiff Commscope Credit Union is a North Carolina chartered credit union which retained Defendant Butler & Burke, LLP, a certified public accountant firm, in 2001 to provide professional independent audit services. Defendant represented to Plaintiff that it had special expertise in providing auditing services to credit unions and other nonprofit entities. Defendant's engagement letters between 2001 and 2010 asserted that it would, inter alia,
plan and perform audit[s] to obtain reasonable assurance about whether the financial statements are free of material misstatements, whether from errors, fraudulent financial reporting, misappropriation of assets, or violations of laws or government regulations that are attributable to [Plaintiff] or to acts by management or employees acting on behalf of [Plaintiff].
Each year from 2001 to 2009, Plaintiff's general manger, Mark Honeycutt, failed to file with the Internal Revenue Service (" IRS" ) a Form 990, Return of Organization
Exempt From Income Tax Returns (" the tax forms" ). In the course of its audits, Defendant never requested copies of the tax forms, and, as a result, did not discover Plaintiff's failure to file them. In April 2010, the IRS notified Plaintiff of its filing deficiency and later informed Plaintiff that a penalty of $424,000 had been assessed against it. The penalty was subsequently reduced to $374,200.
On 8 November 2012, Plaintiff filed a complaint in Catawba County Superior Court against Defendant alleging claims for breach of contract, negligence, breach of fiduciary trust, and professional malpractice. On 28 January 2013, Defendant answered, asserting several affirmative defenses. Defendant filed a third-party complaint on 25 February 2013 against various individuals who had been directors, officers, and supervisory committee members of Plaintiff. That complaint included claims for contribution, indemnity, negligent misrepresentation, and fraud. The third-party defendants answered and asserted various affirmative defenses. Three of the third-party defendants moved to dismiss pursuant to Rule of Civil Procedure 12(b)(6). On 6 June 2013, Defendant moved to dismiss Plaintiff's complaint pursuant to Rule 12(b)(6) and 12(c). On 26 September 2013, the trial court granted Defendant's motion and dismissed the case. This action rendered the third-party defendants' motion to dismiss moot, and the trial court did not consider or rule on that motion. From the order granting Defendant's motion to dismiss, Plaintiff appeals.
Plaintiff argues that the trial court erred in granting Defendant's motion to dismiss for failure to state a claim upon which relief may be granted pursuant to Rule 12(b)(6) and on the pleadings pursuant to Rule 12(c). We agree.
I. Standards of review
When a party files a motion to dismiss pursuant to Rule 12(b)(6), the question for the court is whether the allegations of the complaint, treated as true, are sufficient to state a claim upon which relief may be granted under some legal theory, whether properly labeled or not. The court must construe the complaint liberally and should not dismiss the complaint unless it appears beyond a doubt that the plaintiff could not prove any set of facts to support his claim which would entitle him to relief.
Sharp v. CSX Transp., Inc., 160 N.C.App. 241, 243, 584 S.E.2d 888, 889 (2003) (citations and internal quotation marks omitted). " When the complaint states a valid claim but also discloses an unconditional affirmative defense which defeats the asserted claim, however, the motion will be granted and the action dismissed." Skinner v. E.F. Hutton & Co., 314 N.C. 267, 270, 333 S.E.2d 236, 238 (1985) (citation omitted).
" A motion for judgment on the pleadings [pursuant to Rule 12(c)] should not be granted unless the movant clearly establishes that no material issue of fact remains to be resolved and that he is entitled to judgment as a matter of law." B. Kelley Enters., Inc. v. Vitacost.com, Inc., 211 N.C.App. 592, 593, 710 S.E.2d 334, ...